Wednesday, March 17, 2010

Impact of Persistent Systems IPO on Pune real estate

The Persistent Systems IPO opens today and is intended to raise over 167 crores. I have known about Persistent Systems for a long time and know some people who work there. Dr Deshpande the CEO is different then the rest of the businessmen in India, most of whom are ready to scam the people and make a quick buck in the stock market. I remember visiting the Persistent office in the PCMC MTDC STP in Aundh in Jan 93 when Pune was a sleepy town and everything used to shutdown at 7:00 pm. It has since grown organically as they kept building on their core strengths of systems programming as their niche rather then become the jack of all trades.

My feeling is that quite a few employees in Pune will have excess of 10-20L post the IPO as their options become liquid. With 4400 employees on their payroll, I have a feeling atleast 70-80% of them will cash out their options and buy some real estate in Pune, but I am also guessing that the Mumbai style purchases by investors with 10-20% down is going to eat up supply as people start to get greedy.

I think Pune builders are going to benefit big time in the short run as this mania is induced by the builders thereby driving other fence sitters into taking the plunge. Remember Pune is still cheap as compared to Mumbai and a lottery of 20L is almost a once in a lifetime opportunity.

If this blog has ever given a bullish signal it is giving now, only for Pune real estate. The key would be to negotiate prices before the Persistent folks start cashing out. I don't know the lock-in period of the IPO but I presume that it will be atleast 3-6 months before they are eligible to cash out. In essence investing in Pune real estate is a proxy for investing in the Persistent IPO, where you can leverage the bank for 80% of the amount. I would only advise this only to serious buyers in Pune and not those who would like to flip in 6 months. Livable areas close to Persistent, Pashan, Baner , lesser degree Hinjewadi, Wakad should be good bets

If we have any readers of this blog from Persistent I would like to know what they are doing with their liquid stock options

26 comments:

Bindas Bhai said...

One Swallow A Summer Does Not Make

Having said the above I to strongly believe that it is right time to buy in Pune. What matters is the location and of course the price.

In Mumbai when the prices goes up quality and location takes a back seat which is very dangerous in long run.

Buying now in Pune makes sense because there is always a lag between Mumbai & Pune,(Mumbai is already up by almost 35% in most of the areas) loading is far less in Pune if you compare with Mumbai(u get less cheated). I dont know much about other areas but know for sure, Hadapsar, Kharadi and Viman Nagar is a good bet.

All the best Guys!!!

Bindas Bhai

Anonymous said...

Again a story planted by Pune RE pimps.
And its funny when the story writer says "10 to 20 L". Will you get a Flat for 10 Lakhs ?

Don't get fooled by such rumours. Let the RE market crash. There is no race here as to who purchases a flat first ? Or who gets a medal for purchasing a flat ?

This seems a very desperate & poor attempt by Pune RE p*mps to lure buyers.

Persistent IPO is too small a IPO to have any effect on pune RE.

Anonymous said...

This story confirms that Vik is either -
1) A Pune RE pimp or
2) A stupid investor heavily invested in Pune RE and who doesn't want Pune RE to crash so as to avoid losses.

Vik, your story shows how desperate you are, otherwise you would not have tried to lure buyers to buy RE at current stupid levels.

Vik said...

I knew some folks will be unhappy with my post, however this is my personal opinion. FUD will be created by marketing and I am just forewarning any fence sitters to evaluate their options. Personally I know many people who are waiting patiently and waiting for the other side to blink. In this case Persistent folks have a stronger hand, so and ahead of the race to reach the end.

I think there are places in Pune at 3000 rs. I'm not asking anyone to pay 4,000 or above however my conservative estimate is that in the next year prices will be up atleast 10%

BTW neither have I any vested interest in selling apts nor I am heavily invested in real estate in Pune. Infact I will be most happy person if prices drop 50%, however I don't see that happening.

Anonymous said...

INDIA GDP set to jump fourfold to $4.5 trillion by 2020: Edelweiss

Anonymous said...

You dont get nothing for 20L in Pune, dont worry folks, Pune has a far long way to go before prices are in sycn with reality.

Anonymous said...

Anon @11:50am

You don't get anything for 20 Lakhs,<-TRUE.

However, the person who had 10 lakhs and could take a loan of another 10 would have an extra 20 raising his buying power from 20 lakhs to 40. Net result -> demand increases. Now question arises, how many people would be able to take advantage of the IPO etc etc.

Of course the question is how much can real estate rise when finally it starts to be a drag on the economy? India housing is definitely overpriced.

shailesh said...

That was quick: realtors now skip affordable stuff

Mumbai: A year after singing hosanna to affordable housing, realtors are looking the other way — to high-end and premium projects.

The Lodha Group recently launched the Wing C tower in its residential project Casa Royale in Thane, offering 2BHK flats of 927 sq ft super-built area at Rs 4,995 per sq ft, thereby quoting a price of around Rs 46 lakh per flat, excluding parking and other ancillary charges. Considering the flats were priced Rs 27.63 lakh onwards at launch of the project in January, 2009, this represents a jump of 67.58% in the price in a little over a year.

The central Mumbai region, between Worli and Parel, is set to see new launches of 7,000-7,500 apartments in the next 3-12 months, not to mention the under-construction and unsold projects in the region.

“Every developer now has a wide range, which was not the case a year back. Last year, the emphasis was on affordable and developers are now balancing it with more high-end ones. In the next 3-12 months, Rs 45,000-50,000 crore worth projects would be up for sale in the central region itself,” Anand Narayanan K B, director, residential agency of international property consultants Knight Frank, said.

“If the equity market remains robust, it will get absorbed, but if the market is fatigued, then it will take time to absorb this kind of supply,” he said.

Happily for the developers, the market is back near the peak prices of 2007.

shailesh said...

Builders' NRI focus puts new homes out of common man's reach

Take Kalpataru developers — it is building a 750-unit project — Kalpataru Aura — in Ghatkopar. The project launched a couple of months ago has properties in the price range of Rsl.25 crore to Rsl.50 crore. Its Malad project, Kalpataru Pinnacle, will have 80 exclusive apartments, each priced at around Rs3 crore.

Lodha Developers has launched a 42-storey apartment building, Lodha Imperia, at Bhandup, with flat prices inching towards the Rs1-crore mark.

The target audience of these builders is apparently NRIs from Europe and the US.

Anonymous said...

"
The target audience of these builders is apparently NRIs from Europe and the US.
"

True, if the world economy remains in bad shape for a long time to come, many folks would be forced to return after spending considerable time (10+ years) abroad. They would definitely have good savings and would pay up to own...

Anonymous said...

That sounds like a ridiculously long bet!!!!

That a double dip will occur, NRI's will not have jobs, they will come back to India and in the middle of all the uncertainty, buy a Home!!!!

If the realtors want to create a supply overhang on these kind of stupid bets, I can wish them God speed..

Anonymous said...

But at least that is what developers/builders are hoping by planning such ventures

Anonymous said...

It companies and others have been saying they want a minumum of 10% pay raise for Indians. I would say make is 15-20%. I'm happy that more the pay rises in India, more would be salaries in India.

As a result, less would be outsourced work to India and people living in US/UK who pay taxes through their nose and high cost of living can see jobs coming back. Not so soon, these jobs will first go to other cheaper countries and maybe in another 10 years would come back to US/UK, but will be out of India fast.

Anonymous said...

TCS to hire 30,000 next fiscal; give increments in April
18 Mar 2010, 0110 hrs IST, PTI

http://economictimes.indiatimes.com/TCS-to-hire-30000-in-FY-11-give-increments-in-April/articleshow/5694146.cms

I agree with BB and Vik.

Anonymous said...

@ Anon above,
RE speculators are betting too much on such stupid rumours

You should know that 80% of those recruitments would be freshers with very low pay. And these would be only replacement hirings and not additional hirings, just to take care of their attrition. RE speculators are getting happy over stupid rumours.

RE speculators are betting too much on such stupid rumours, which these IT companies keep on spreading at regular intervals to put up a brave face and to increase their share prices.

Actually there are serious doubts over the figures reported by the IT companies regarding their Projects, clients, revenues, profits, attrition and lots of things. Many companies have manipulated these figures to keep the sentiments positive.

Anonymous said...

What is Vik's motive in misguiding buyers to buy RE at such high prices ?

Vik must be either a builder or a RE p*mp or a banker wanting to sell his home loans to trap buyers for 25 years or a RE investor/speculator.

Apart from these four categories of people nobody would want to purchase RE at current inflated prices.

And saying - buy Pune RE as it is cheaper than Mumbai RE, is the most stupid advice, because average Pune income is also quite less than average income in Mumbai.

Anonymous said...

Guys, Please be mature enough and stop calling names. I am expressing my opinion. Ok Pune will fall 50% over the next 2 years. Happy ?

Anonymous said...

Only area in pune worth living is dekkan. The rest is occupied by third rate north indians who have brought crime, prostitution, criminality with them

Anonymous said...

- US and Europe is in deepest recession (depression) of 70 years.
- 60% IT business comes from US, 30 % from Europe and 10% from rest of geographies.
- Quite a few organisations and banks have gone bankrupt and are still going bankrupt.
- US and UK governments have bailed out many big organisations and the orgs are still struggling.
- IT is a discretionary spending.
- If these organisations are struggling themselves and as IT is discretionary spending, how can they spend on IT to this extent (as reported by IT companies) ?

In the context of above points, how did IT companies report such handsome revenues and profits during recession ?

Their accounts and balance sheets need to be audited again to reveal the reality.

Anonymous said...

Builders, bankers and politicians are colluding with each other to hold the country to ransom by artificially maintaining high RE prices.

Somebody should file a PIL (Public Interest Litigation) in Supreme Court to expose the loans provided to RE sector, the restructured loans, the NPAs, also regarding transactions done with ARCIL for troubled assets, so that RE bubble gets burst.

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